Recent news release from Insurance Council Australia
ICA modelling suggests that reducing flood risk through permanent mitigation could reduce insurance premiums by up to 21 per cent. Further significant premium reductions of 9-12 per cent would be possible through improving building resilience to storms and cyclones, and improvements in flood data to show first-floor heights. Premiums would also fall by 9 per cent if the Queensland Government removed stamp duties on insurance.
APRA’s view, which we outlined in our submission to the ACCC’s Northern Australia Insurance Inquiry last September, is that declining insurance affordability and accessibility in Australia’s north can best be meaningfully and sustainably addressed by tackling the root cause: the high, rising and volatile cost of natural disasters. The most effective way to do this is through greater investment in mitigation to protect homes, businesses and infrastructure from damage. There may be other approaches that serve, for example, to subsidise the cost of insurance, but on their own they will ultimately be less effective because don’t lower the risk and may reduce the incentive to mitigate it.
Insurance issues have been quiet in Cairns during the state election campaign despite a looming La Nina. Removal of stamp duty is unlikely without broader taxation reform. However the recommendation ignored is that if stamp duty is not removed to change the basis from a duty on the premium to a duty on the building sum insured, revenue neutral. Premiums wouldn’t reduce by 9% but would skew the costs away from Tropical Queensland where premiums can be multiples higher, particularly for strata. To my knowledge no local politician or media has ever actively promoted this.
Most of the controversy in insurance relates to strata which is a sector regulated by the state government and the market and distribution is different to house and contents. It is also a sector with a far higher share in Cairns than other regional centres outside SEQ. There is a post today at the ABC: Insurance cripples northern Australians as they wait on promised Government action to stem rises
Unit owners in northern Australia are begging for promised Federal Government intervention to drive down soaring insurance premiums, with some unable to afford their bills.
After fifteen torturous years on body corporate committees which included almost every public insurance meeting or seminar in Cairns I have been free of that responsibility for two years so may need catch up on what’s happening. However in the past media reports typically highlight ‘war stories’ not representative of the totality when properly analysed. The property featured here is in a low lying area adjacent to the Mackay waterfront.
There have also been indications though of increasing reinsurance costs for the insurers in the past year. The role of catastrophe reinsurance is not well understood in the community.
The final report from the ACCC is due next month. The history of the insurance saga is detailed at the insurance page on the main menu at the top of the page.